So alphabet is sitting on a jewel.
It is self-evident that Alphabet / Google's (GOOGL) $ 1.65 billion purchase of YouTube in 2006 was one of the smartest big technology takeovers in history, and that the online video giant would be worth tens of times if they were today to be published.
But how much more would YouTube be worth in such a scenario? That's a pretty tough question – both because Google still does not leverage YouTube's revenue and revenue, and because it's hard to think of a truly comparable, publicly traded partner.
YouTube Annual Yield Estimates Everything still comes from ads varies a fair amount. But many estimates now exceed $ 1
Regardless of the exact number, YouTube's ad sales are expected to grow rapidly. In its earnings talks, Google has signaled that YouTube is the biggest driver behind the rapid growth in ad revenue outside of mobile search. In the last quarter, "paid clicks" on Google's websites and apps grew 59% per year. Not only the actual ad clicks, but also the number of YouTube video ads viewed long enough for Google to be paid.
As far as things are concerned, YouTube's revenue growth has not been greatly impacted by concerns from some companies – such as Cisco Systems (CSCO), which has just announced that it will stop spending its YouTube ads on its content consider them inappropriate. It also does not seem to have been bad if YouTube has been trying to discourage such advertisers by "demonizing" videos whose algorithms are deemed inappropriate for delivering ads, or by reacting to affected content creators.
YouTube is still – The rapid growth – driven by smartphones and partially networked televisions – has a lot to do with its sales momentum. In the Newfronts online video ad campaign last week, YouTube announced that it now had over 1.8 billion registered users per month, up from 1.5 billion last June. And in February 2017, YouTube announced that it handled more than a billion hours a day – about three times as much as Netflix (NFLX) on a record-breaking day in January and ten times what YouTube watched in 2012.
YouTube: By Numbers
The power of YouTube ad targeting capabilities, enabled by both proprietary user data and external data that Google can access, is also available contributed. That's why we're investing in the development of quality measurement tools that enable companies to analyze the impact of a video ad on things like product awareness and attitudes toward the brand it sells. Second Bumper Ads did not hurt either. Nor is there any more profound shift from video ad dollars to online channels with continued declines in traditional television (especially among the younger demographic groups that YouTube has seen so much of).
And even though they do not appear to be huge revenue contributors at this time, the YouTube Red and YouTube TV subscription services can not be overlooked when trying to evaluate the company. In particular, YouTube Red, which offers ad-free YouTube, some original shows, and access to the Google Play Music service for $ 10 a month, made YouTube the most successful iPhone app in the US in March. Later this year, Google plans to replace Google Play Music – in many ways Red's weak connection – with YouTube Remix, a music service fully integrated with YouTube.
What kind of revenue multiple does this fast-growing Videojuggeraut deserve? ? It's hard to think of a direct comparison. Netflix, which handles more than eight times its 2018 revenue mix, relies on subscriptions rather than ads. And while YouTube relies heavily on advertising sharing agreements with content partners, Netflix pays its content partners directly for their material.
Facebook (FB), which is about to implement its 2018 sales consensus about nine times, still sees 40% – plus revenue growth and some big growth levers that still need to be printed are probably better given the business model, network effect and market dominance for YouTube. But Facebook is quite profitable – despite high data center spending and content security, Facebook's net income consensus of 2018 is $ 22.5 billion – and based on comments from YouTube CEO Susan Wojcicki and others – YouTube earnings may still be minimal Thanks to the huge investments in data centers and content.
But even if you devalue the multipliers of YouTube a bit because of their profit insecurity, you still have a very valuable business. With a sixfold revenue estimate from Mizuho, YouTube would be worth $ 90 billion. Seven times it would be worth $ 105 billion. And those valuation numbers would increase slightly more if you stopped a small premium (about $ 5 billion or $ 10 billion) for the potential of YouTube's subscription businesses.
It should be noted that even Twitter (TWTR) which has a low monthly revenue growth among users and ads, is estimated to be more than seven times the 2018 sales consensus. And Snap (SNAP) which is facing a slowdown in user growth and big questions about long-term profitability despite strong sales growth, is worth more than 11x the 2018 revenue mix.
All this suggests a rating of six to seven times. Short-term sales are more than adequate for YouTube. And considering how much YouTube is worth even at such multiples, one can argue well that the value of the company is not fully anchored in Alphabet's shares.
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